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Posts Tagged ‘debt’

• Talks between Tom Hicks and Blackstone come to nothing
• Supporters’ groups welcome news and plan protest

Liverpool supporters’ groups today welcomed the news that the private equity firm Blackstone had ended talks with Tom Hicks, the co-owner who had hoped to retain control of the club.

Hicks last week met Martin Broughton, the Liverpool chairman who was installed by the principal lender, Royal Bank of Scotland, to oversee the sale of the club in conjunction with Barclays Capital. The American informed Broughton of his intention to refinance the £237m owed to the bank. That led to speculation over the weekend that GSO Capital Partners, the debt restructuring arm of Blackstone, was close to agreeing a £280m refinancing deal that would have allowed Hicks to pay down the loan and inject new equity into the club.

Such an agreement would have given Hicks two years in which to find a buyer willing to pay a premium on the £218.9m that he and George Gillett paid for Liverpool in 2007. The prospect prompted dismay among fans’ groups who have waged a long campaign against the two owners. Such groups bombarded Blackstone and GSO executives with emails over the weekend.

But it is understood that, although talks took place, a formal financing offer was not made. Blackstone sources said the decision had been made for business reasons and not as a result of public pressure.

Hicks and Gillett announced in April that they were prepared to sell Liverpool but their desire to make a return on their investment and the sums required to stabilise Liverpool’s debt, invest in the squad and build a new stadium have deterred potential bidders.

Hicks had hoped that new funding would allow him to take full control, pay down the debt and provide funds for players. Under the plan Gillett’s stake would have been diluted. Now Blackstone has walked away, Hicks will search for a replacement loan before the mid-October refinancing deadline.

It is understood that RBS is reluctant to take the “nuclear option” of taking full control of the asset when the refinancing deadline passes and could yet “roll over” the debt to allow Broughton and his board more time to find a buyer. But at the same time RBS is keen to maintain the pressure on Hicks and Gillett to stand aside.

A first attempt by Hicks to refinance the debt was rejected earlier this year by the Liverpool board, allowing Barclays Capital to continue the search for a buyer. If Hicks were to approach the board with a new proposal it is believed they would look to block it, although lawyers are split on whether they would be able to do so under company law.

The news that Blackstone has pulled out of refinancing talks will be welcomed by the board, removing as it does the prospect of an imminent battle with Hicks. But finding a route forward will be no easier if no credible bidders emerge. Despite speculation a number of interested parties, including Kenny Huang and Rhône Capital, have failed to back up their reported interest with a formal bid.

The supporters’ union Spirit of Shankly welcomed the news that Blackstone had turned down Hicks’s approach and called for two days of protest against the club’s owners and the financial institutions which have lent them money. The group will hold an emergency general meeting on Saturday morning before Liverpool’s game against Sunderland at Anfield, followed by a protest at the match.

“We would like as many supporters as possible to make their feelings known towards the owners during the Sunderland match, using banners, flags and songs,” the group said. “Following the match, irrespective of the result, we intend to hold a sit-in protest. Regardless of where you sit, remain in the ground and make your views heard. Gather at the front of the stand you are in, with flags and banners, and make your voices heard.

“To build on the momentum of this protest and to increase pressure on the owners we are also proposing a day of action at the match against Blackpool,” said the statement. “We will start this day with a mass march to show our anger towards the owners and those responsible for our current situation. It will also be an opportunity to show support for what we want to achieve – genuine supporter involvement in how Liverpool football club is run.”

LiverpoolOwen Gibsonguardian.co.uk

The manager’s remarks about Liverpool’s finances may not be earth-shattering but at least someone senior is acknowledging the truth

Byline

Rafael Benítez says Liverpool are in debt: shock, astonishment, clear the back page. The manager says Liverpool must reduce this debt and so do not have millions of pounds to spend buying players: astonishing and extraordinary.

Benítez has shocked us, in truth, with a statement of the bleedin’ obvious, but it is noteworthy that somebody in his position has finally come out and said it. Being taken over by two North American businessmen, who loaded on to the club the £174m they borrowed for their takeover, was not, after all, the most glorious event in the history of a great football club.

When Tom Hicks and George Gillett arrived, they portrayed themselves as the friendly and benevolent Americans, smiling humans compared with the odd-seeming Glazers of Tampa Bay and Old Trafford. They were not going to “do” a Glazer and load debt on to the club; they would build the new stadium on Stanley Park, which would allow Liverpool truly to compete with United; they would honour and respect Liverpool’s heritage.

Yet a skim-read of the official documents that accompanied their takeover blew away their claims to benevolence. They were in fact visiting the same awful trick on Liverpool as the Glazers did at Manchester United, just in a lower key.

The Glazers bought the world’s richest and arguably most glory-drenched football club for £831m, of which £559m was borrowed, £275m of it from hedge funds at eye-watering interest rates. The club itself, which had Sir Alex Ferguson, his conveyor belt of talent, the resources to expand Old Trafford to an opponent-busting 76,000 and cash in the bank, was itself loaded with the maddening responsibility to service repayment of those borrowings. In the three years to 2008 the club has incurred £263m in interest charges alone but the total debt has actually risen to £700m.

At United Ferguson has never truly acknowledged that monstrosity, which alienated many fans, led to a breakaway club, FC United of Manchester, being formed and produced the mass leakage of money once the Glazers arrived. Those interest payments have pushed the world’s most profitable club into losses every year since the takeover and the £81m received for Cristiano Ronaldo has patently not been spent on players or anything else.

United, however, reject the suggestion that £700m of debt has adversely affected the club financially in any way; they argue that the club makes so much money there is some for Ferguson to spend but he has not wanted to.

At Liverpool the debts are lower but the club can ill afford them because of Anfield’s smaller capacity, not a brick of the new stadium having materialised almost three years after Hicks and Gillett arrived. Their latest figures showed the club had borrowed £313m, including the costs of the original takeover, and last year paid out £36.5m to the banks in interest alone – that is Xabi Alonso plus £6.5m, gone. That helped push the club into a £42.6m loss at a time when vastly more wealth is flowing in than ever before.

Benítez now acknowledges this debt is a problem, and the need to reduce it has eaten into his transfer budget. This is not a revelation that qualifies as earth-shattering; it simply states what has been horribly plain all along. These “leveraged buy-outs” were not mystical, transatlantic, financial wizardry for which the clubs and their fans should be grateful. They were speculators’ devices which smothered the clubs in mountainous, pointless debt.

The only news here is that somebody senior has finally said it, and that is a relief.

Rafael BenítezLiverpoolPremier LeagueDavid Connguardian.co.uk